TSX jumps on Summers exit from Fed race

TORONTO (Reuters) - Canada’s main stock index rose on Monday after U.S. Treasury Secretary Lawrence Summers withdrew from the race to become chairman of the Federal Reserve.

Gains in every major sector took the index to its biggest single-day percentage jump in more than two weeks, and advances in the financial sector were the main drivers.

Investors bet that a gradual unwinding of the U.S. central bank’s stimulus measures was likely now with Summers out of the race to replace Fed Chairman Ben Bernanke.

The news comes days before a crucial Fed meeting, which investors expect will provide more clarity about U.S. monetary policy direction.

“The assumption investors are making is that (Fed Vice Chair) Janet Yellen is a moderate in terms of monetary policy,” said Irwin Michael, portfolio manager at ABC Funds. “People are looking at that favorably, that we’ll get the same sort of policy we’ve had with Bernanke.”

“She would provide continuity, and the market is factoring that in,” he added.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed up 93.48 points, or 0.73 percent, at 12,816.88, its biggest single day percent jump since August 29.

The benchmark Canadian index is up about 5 percent this quarter after a sluggish first-half performance.

Investors taking a longer-term view of the Canadian market could reap some benefits by the end of the year, despite some short-term volatility, said Fred Ketchen, director of equity trading at ScotiaMcLeod.

“My guess is cautious moves will still be made on the upside,” he said.

In the group, Royal Bank of Canada (RY.TO) was up 0.9 percent at C$65.91, Toronto-Dominion Bank (TD.TO) rose nearly 1 percent to C$90.79, and Canadian Imperial Bank of Commerce (CM.TO) gained 0.8 percent to C$81.74.

Aimia Inc (AIM.TO), which runs the Aeroplan loyalty program, struck a deal with TD and CIBC under which TD will be the issuer of Aeroplan cards and buy half of CIBC’s existing Aeroplan portfolio, with CIBC retaining the rest.